Yesterday, gold fell $26.70 in the cash market for a 3% decline. Silver suffered a 3.35% fall. The declines added to gold’s and silver’s losses since the middle of March, when they hit decades-high prices. (Actually, gold hit a record high, but silver is still far short of its 1980 high of $50.) Gold’s mid-March through June 10 decline: $134.50 for a 13.4% drop. Silver slipped $4 for a slightly larger decline of 19.3%.
Silver suffers bigger declines in falling markets but enjoys bigger gains in rising markets, which is to say that silver is more volatile than gold.
Big declines are enough to send new gold/silver investors back to the stock market. However, veterans of the precious metals markets know that large, sharp movements, up and down, often come on meaningless news. Since the first of the month, there has been talk of Treasury Secretary Henry Paulson’s frequent comments about a “strong dollar.”
Such talk is utterly ridiculous in the face of the U.S. fiscal policy of massive deficit spending and interest rates that are artificially depressed by the Fed. Still, what flies in the mainstream media affects gold and silver prices.
Veteran precious metals investors also know that gold and silver prices are seasonally low during the summer months. So, with gold and silver having suffered significant losses since their March highs, the worst may be behind us.
Still, with 2-1/2 months to go before summer ends, gold and silver could see additional sharp moves to the downside. And, they may see sharp upside moves, such as today. As this is written, gold is up $10 and silver $.20.
Investors thinking of adding to their gold and silver positions should take advantage of the traditional summer price weaknesses. Remember also: unless you are the luckiest person in the world, no matter when you buy gold or silver prices will go lower before they go higher.
I tell clients that investing in gold and silver is akin to playing football. If you’re not prepared to get knocked down, don’t play. Prices will fluctuate lower before they go higher. You just have to pick an entry level and buy. A year from now you’ll be happy you did; two years from now you’ll be delighted. This is a big gold/silver bull market, and it has a long way to go.